Advertising spend will remain restrictive. We believe businesses will continue to be spending less on advertising given the weak consumer confidence as interest rates are likely to remain elevated for a prolonged period. Although total advertising has been rising, we note that the rate of growth has slowed down since 2H 2023. Given a more aggressive advertising spend during last year-end festive period, which spilled over to early 2024, we reckon that businesses would cut back on expenses for the remainder of the year. Although digital advertising has been gaining momentum, its market share has fallen to below 20% in recent months, replaced by the traditional TV advertising at >60% of market share. Nevertheless, we believe this is just a short-term blip and over time, digital advertising will continue to gain significance.

Continuous investment in digitisation while monetisation will take time. Based on Statista’s projection, Malaysia’s advertising spending in the digital market is expected to reach USD1.04bn in 2024. By 2028, mobile advertising is estimated to account for 48% of total advertising spending. Some industry data is suggesting that the size of digital advertising is projected to be three times the size of traditional advertising in the future.

Moving forward, it is undeniable that digital advertising as well as out-of-home media will continue to gain significance in the media industry. This includes digital boards with LED technology, search advertising and video advertising. As such, it is crucial for local broadcasters and media companies to reinvent as well as invest in digitization to maintain their relevance in the advertising industry, though monetisation may take years to materialise due to rising operational cost and more intense competition from both local and global players. Hence, earnings growth for media stocks are not expected to surprise on the upside in 2024

Source: PublicInvest Research - 26 Jun 2024